In the new issue of Regulation, economist Pierre Lemieux argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil. The increased supply allows the economy to produce more goods, which benefits some people, if not all of them. Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

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Cato Policy Report

Cato Conference: “Central Banks Becoming Obsolete, Jordan Says”

Globalization is making central banks obsolete, said Jerry L. Jordan of the Federal Reserve Bank of Cleveland at the Cato Institute’s 17th Annual Monetary Conference, “The Search for Global Monetary Order,” on October 21.

“If monetary sovereignty or independence is not worth much in today’s global capital markets, and if seignorage is quite small in a noninflationary world, then the costs and risks associated with a national central bank and a national currency become harder to justify,” Jordan said. He also opined that international organiza-tions such as the International Monetary Fund might have a useful role as “financial night watchmen” for the interna-tional economy, rather than as active players. “A common element of all financial crises of recent years was the existence of government guarantees—to pensioners, producers, intermediaries—that were revealed to be unsustainable. The sooner the revelation, the better countries were equipped to eliminate the distortions without a crisis, and to this end an international organization might truly add value.”

Do we need a new Bretton Woods, the system of fixed but adjustable exchange rates designed at the end of World War II? No, answered Anna Schwartz of the National Bureau of Economic Research. “A new Bretton Woods system is not needed so long as independent central banks worldwide set as their primary goal an inflation-free economy, as indeed is the case in the advanced industrialized countries.” Judy Shelton of the DUXX Graduate School of Business Leadership in Monterrey, Mexico, said that a new Bretton Woods could help solve international monetary disorder but that the new system shouldn’t be designed by government. “The new Bretton Woods will be established as a result of private initiative, inspired by technological innovation, and dedicated to the consumers and producers of the world.” She pointed out that with a number of online companies already providing more choices for consumers, there will be a demand by consumers for “a form of global money that functions as a legitimate tool of private commerce, not a policy lever for government.”

One of the issues at the forefront of monetary policy is whether Latin American nations should make the dollar their official currency. William A. Niskanen, chairman of the Cato Institute, argued that “our government should not promote a general dollarization of Latin America. Our government should accommodate the dollarization of any specific Latin American country, if requested by its government for its own reasons.”

Economists Allan H. Meltzer and Ronald I. McKinnon continued their long-running dispute over monetary policy in Japan. Meltzer contended that Japan is not in a “liquidity trap,” so expansive monetary policy would effectively devalue the yen against the dollar and restore Japan’s competitiveness. McKinnon disagreed, arguing that expansive monetary policy would be a mistake and what Japan needs to do is to stabilize the long-run value of the dollar/yen exchange rate by entering into an agreement with the United States. Printing more yen now would only undermine the future value of the yen. Thus, “the fear of future yen appreciation [against the dollar] could still remain and even be strength-ened.”

Other speakers at the conference included Peter B. Kenen of Princeton University, Leland B. Yeager of Auburn University, Alan C. Stockman of the University of Rochester, Charles W. Calomiris of Columbia Business School, David Malpass of Bear Stearns, George Selgin of the University of Georgia, and Stanley Fischer of the International Monetary Fund.